Asset Protection

09/14/2018

The Social Security Administration uses many factors to calculate benefit amounts for beneficiaries, and that includes marital status. Those who remarry late in life need to be aware of what could change as a result. This article from Investopedia’s, “How Remarrying Late in Life Impacts SS Benefits” explains the details.

If you’re widowed, you may want to wait until after age 60. If either you or your fiancé is widowed and getting Social Security benefits based on the deceased spouse’s work record, his or her age matters. A surviving spouse who remarries prior to age 60 becomes ineligible to receive benefits on their late spouse’s record. However, after your first anniversary with your new spouse, you become eligible for spousal benefits based on their work record.

Couples in their late 50s with questions about the Social Security implications of their marriage can do the numbers. They can decide whether to delay their marriage to keep a widow’s benefit for longer, or if the spousal benefit from their new union will offer more financial security. As long as you’re married at least nine months before one spouse’s death, the surviving spouse is eligible for spousal benefits based on the second marriage.

A second marriage after divorce. If one or both members of the new couple is divorced, things are a bit trickier, because the Social Security Administration does allow divorced spouses to collect spousal benefits, based upon the work records of an ex-spouse, if the divorced beneficiary meets these criteria:

The original marriage lasted at least 10 years.

The beneficiary applying for divorced spousal benefits has remained unmarried.

The beneficiary applying for divorced spousal benefits has reached at least age 62.

If you are divorced from an ex who significantly out-earned you and your new fiancé, remarrying stops the ex-spousal benefits you’d otherwise get. Therefore, cohabitating without getting married, sometimes makes more financial sense for some couples.

What if you are receiving Social Security Disability Insurance? Beneficiaries who are receiving Social Security Disability Insurance (SSDI) may have the most difficult calculations when looking at a second marriage, because they’re subject to a family maximum benefit (FMB) calculation that limits the amount of money available for auxiliary benefits, like the dependent child benefit.

Calculate and compare these three amounts to determine FMB:

85% of the worker’s average indexed monthly earnings (AIME).

The worker’s primary insurance amount (PIA) based on full retirement age.

150% of the worker’s PIA.

If number three is the highest, the FMB is the higher of number one or two. If number one is the highest of the three, the family maximum benefits is number three.

A late-in-life marriage usually brings smiles to everyone’s faces. However, before walking down the aisle, make sure that you both understand the impact that your wedded bliss could have on your Social Security benefits. This is also the time to sit down with an estate planning attorney to make sure that your estate plan is updated, and that other necessary documents, like power of attorney and medical directives, are up to date.

A joint bank account can be a quick and easy way to help your parents pay bills and monitor their spending. With you monitoring their account, it’s also easier for you to see potential fraud. It allows an adult child to watch for unauthorized purchases or other issues with the account, like late fees or overdrafts. Another benefit is that in the event of your parents’ deaths, you will have immediate access to the account funds without the need to go through the probate process. This can be helpful when paying burial and other final expenses.

However, there’s plenty that can go wrong if you have a joint bank account with your parents.

First, your parents’ money won’t be safe from your own debts or liabilities. If something happens to you, like an accident, divorce, or bankruptcy, you’ll be putting your parents’ money at risk. Depending on the rights of survivorship on the account, all the money in the account could go directly to you when the last of your parents dies. That would disinherit your brothers and sisters.

If you make deposits to the account yourself, it may impact your parents’ eligibility for government benefits, like Medicaid. A joint account may also play a role in your child’s student financial aid eligibility because government and financial institutions can designate all the money in the joint account as your money—even if half of it is yours and half belongs to your parents.

There can also be tax implications to having a joint account. The IRS could deem this to be a gift, triggering a gift tax return, if the account is valued above $15,000 (from each parent for 2018). Likewise, if the parents and adult child open a new account together, and the parents deposit a large amount of money which the adult child later withdraws, it could arguably be seen as a gift.

Look at these options that might work better for you and your family instead of a joint bank account:

With signature authority on an account, you can pay your parents’ bills. However, you won’t be authorized to use the money in ways that aren’t for their benefit, and the money will be protected from your creditors.

With power of attorney, an adult child can make financial decisions on the accounts that are titled in the parents’ names. The POA should be durable, so that it will still be in place, if the parents become incapacitated.

Your parents can create a revocable living trust, appoint you as co-trustee and open a bank account in the name of the trust with two or more signers. Talk with an estate planning or elder law attorney to see if this makes sense in your situation.

If you’re worried about your mom or dad’s mental capacity, you petition the court for guardianship, which will let you to manage his or her finances. The guardian doesn’t own the funds, and the money can’t be garnished or seized to settle a guardian’s debt. However, it’s a difficult and complicated process. All concerned may be better served to have a durable power of attorney in place, before a parent becomes incapacitated.

What if your larger concern is that funds will not be available after your parents die, because they’ll be part of probate? One way to address is by adding a ““Payable on Death” provision to their bank account. The funds will be paid directly to the account’s beneficiaries. A word of caution: speak with an estate planning attorney to be sure that this will not have an impact on any estate planning already in place.

08/10/2018

It’s true—planning a summer vacation is far more fun that facing your own mortality and deciding who gets Aunt Susan’s soup tureen. However, families who are left to clean up the mess, when a loved one doesn’t put an estate plan into place, including a will, power of attorney and healthcare directive documents, are the first to tell you, they’d rather you go on vacation after you prepare your estate plan.

Investopedia’s recent article, “4 Reasons Estate Planning Is So Important,” reminds us that estate planning isn't only for the rich. To show you that estate planning is necessary, look at these four reasons why you should have an estate plan to avoid potentially devastating consequences for your loved ones.

Keeps Your Wealth From Going To Unintended Beneficiaries. Estate planning helps middle-class families plan, in the event something happens to a family's breadwinner(s). If you don’t decide who receives your assets when you pass away, you won’t have any control as to who gets what. Without an estate plan, a probate court will decide who gets your assets, based on state intestacy law. This may not be what you would have wanted. A will can avoid this result.

Families with Young Children are Protected. If you're the parent of minor children, you need to name a guardian to be certain your children are taken care of the way you’d want. Without this fundamental provision in your will, the probate courts will make this decision.

No Huge Taxes for Your Heirs. Estate planning serves to protect your family from unnecessary estate and income taxes. You want to minimize or eliminate all of their federal and state estate taxes or state inheritance taxes, as well as the income that tax beneficiaries might have to pay. Without a plan, these taxes can be significant.

Avoids Headaches and Messes for Your Loved Ones After You're Gone. Family fighting after a loved one dies is not uncommon, and it's another reason why an estate plan is needed. An estate plan will let you say who controls your finances and assets, if you become mentally incapacitated or after you die. It will also go a long way towards settling or preventing any family conflict and ensuring that your assets are handled in the way you wanted them to be.

Think of an estate plan as a gift you leave, your final message, to those you love from the grave. It’s your way of telling them you cared enough to address the really tough stuff. Contact an estate planning attorney and make your appointment without delay.

08/08/2018

If you are a Class "A" beneficiary in New Jersey and you inherit your family home and a handful of taxable accounts, your inheritance is valued at the fair market value on the day of the decedent’s death. There is no estate tax in this state, and for Class “A” beneficiaries, there is no inheritance tax on these assets. However, you’ll need more details before you know what you’ll be inheriting.

nj.com’s recent article asks, “How will your inheritance be taxed?” The article explains that typically, the fair market value on the date of the decedent's death is almost always more than the decedent's cost basis. As a result, it’s called a "stepped-up" basis and it’s possible the basis could be lower.

Because of the step-up in basis, if you sell the property right after death, there’s typically no income tax consequence. The gain you’d report on the sale is the sales price minus selling expenses, less the fair market value of the property at the date of death.

As far as investment accounts, the new basis of a security is calculated by taking the mean of the high and low price of the security on the date of death, rather than the close price. Let’s say that the decedent passed away over a weekend. The date of death value is determined by taking the average of:

the mean of the high and the low value on Friday; and

the mean of the high and the low value on Monday.

The financial institution will usually give you the investment’s value.

For taxable estates, rather than using the date of death, an alternate valuation date (the date six months after the date of death) can be chosen. In that instance, it must be used to value all of the assets as of the date. You can’t elect date of death value for some assets and an alternate value for others. The IRS also requires consistency in reporting. The basis utilized by the beneficiary as the value of the property received from the decedent, can’t be more than the value of the property reported on the decedent's estate tax return.

For any retirement accounts other than Roth IRAs, income tax must be paid when distributions are made to the beneficiary—like it would have had to be paid on distribution to the decedent. The value of the retirement account in the decedent's estate and/or passing to the beneficiary isn’t reduced by the income tax that will have to be paid on future distributions.

Here’s the difference: if the property is gifted to you, that’s when you obtain the donor’s basis in the property. If you sell the property after you receive it as a gift, it’s more likely that you will have to pay income tax on it, than if you inherited it.

If possible, sit down with an estate planning attorney well in advance of any gift or inheritance and map out the best way to handle the transfer of property.

08/07/2018

The creation of an interdivisional task force at the Securities and Exchange Commission (SEC) to protect senior investors, could become a reality, if the legislation continues to move forward.

Investment News recently published “House introduces bill targeting elder financial abuse.” The article reports that Representative Josh Gottheimer, D-N.J., introduced the National Senior Investor Initiative Act of 2018 to create a team of staff members from the SEC's Division of Enforcement; Office of Compliance, Inspections and Examinations; and Office of Investor Education and Advocacy. They would be responsible for examining the challenges facing elderly investors, focusing especially on the issues seniors have with financial services providers and investment products.

The task force would coordinate with law enforcement authorities, federal agencies, other SEC offices and state regulators, and report its findings every two years to the Senate Banking, Housing and Urban Affairs Committee, as well as the House Financial Services Committee.

The group’s objective would be to recommend specific regulatory or statutory changes that would help senior investors.

The bill also calls for the Government Accountability Office (the “GAO”) to study and report on the economic costs of the financial exploitation of senior citizens, within a year of the bill's enactment.

The law has a sunset clause that will end the task force after 10 years.

The full House subsequently passed by a 406-4 vote, the JOBS and Investor Confidence Act of 2018, also known as House Financial Services Committee Chairman Jeb Hensarling’s “JOBS Act 3.0,” which includes a package of 32 bills.

This “package” included H.R. 6323, also known as the National Senior Investor Initiative Act of 2018, which requires the SEC to make the senior task force a reality.

08/06/2018

In the next few decades, the largest wealth transfer between generations in recent history will take place. This makes legacy planning more important than ever. It also presents an opportunity: the chance for one generation to thoughtfully share its ideas of what wealth means to a family, what the family values are and determine the best way to pass both wealth and values along to the next generation.

Forbes’ recent article, “3 Principles For A Successful Family Legacy,” says that frequently the failure to maintain wealth through the generations is because of a lack of communication, education and trust among generations, not a poor investment strategy or a series of economic downturns. Families who are successful at transitioning wealth from generation to generation, stick to three core legacy planning principles.

Integrating planning. Legacy planning is a collaborative effort that requires open discussion with your wealth advisor, family members and your estate planning attorney. You should first define your goals—how you want to enjoy your wealth and how you want it to benefit your family members and your community. Your legacy is about providing financially for future generations, along with how you want to be remembered. Discussing your values and ambitions to your advisors and those important to you, can help you develop a detailed wealth plan that is consistent with your legacy goals.

The creation of a healthy family wealth culture. Create a healthy culture with a shared set of attitudes, values, goals and behaviors that characterize you as a family. This is vital for legacy planning. Those families who develop a healthy attitude regarding their wealth through open and honest dialogue, are typically more likely to see their wealth preserved from generation to generation.

Develop the next generation. When developing your legacy, be sure to help younger generations understand that thoughtful spending, investing and charitable giving can add to a sense of purpose.

To help move wealth and values across generations, consider a family meeting with your estate planning attorney. If your children are more involved with your wealth management and estate plan, they will be more able to protect your legacy. Age-appropriate transparency, as they are growing up, will make everyone more comfortable with the legacy process.

The petition for the restraining order was filed on Lee's behalf by his attorney Tom Lallas. The lawyer claimed that Morgan ousted him as the 95-year-old's lawyer in February of this year. According to court documents for the order, Morgan seized control of Lee's home and moved him to a condominium. He also hired security guards to keep family members and friends away.

In the petition, Lallas wrote: "Petitioner, along with law enforcement and Adult Protective Services, believes that Mr. Morgan is unduly influencing Mr. Lee and isolating him."

Lallas noted that Lee has a large estate worth more than $50M. As a result, the attorney said his client is vulnerable to financial predators.

Morgan was arrested on suspicion of making a false police report, after calling 911 to report a burglary at Lee's home. The call was made shortly after two police officers and a social worker had arrived to check on the elderly Lee’s welfare.

The restraining order was granted just days after Lee posted a video on his Twitter feed informing the public to get in touch with Morgan, if they wanted to speak to him. The tweet claimed that Morgan was the only person with whom he worked. Lee called Morgan his business partner and said they were conquering the world together. A hearing concerning the circumstances of the restraining order was set for July at Los Angeles County Court.

“I have taken great care of Stan Lee for the past many years, and have never had a problem directly with Stan. I have a fantastic relationship with him for the past many years, as he has stated countless times on the record and I literally saved his life once,” Morgan told TMZ. “I will 100% prove beyond a shadow of a doubt that the allegations against me are false.”

Stan Lee is admired around the world for creation of comic heroes, including Spiderman, the Hulk and Iron Man, among many others. He made a public appearance at the premier of the action movie Black Panther this past January.

07/06/2018

During our working years, it feels like we’ll never actually get to retirement, or spending the money that we have worked for and saved for so long. However, when the time finally comes, you’ll enjoy those dollars far longer, if you don’t lose them because you didn’t square facts with fiction.

US News & World Report’s recent article, “7 Myths About Finances in Retirement,” says that moving into this new phase of life, can create changes in your finances and lifestyle. For most of us, despite the planning, there’ll still be some surprises when you enter retirement. Here are some of the most common financial myths about retirement, as well as the realities behind them.

Medicare covers everything. You’ll be eligible for Medicare the month you turn 65. However, you should remember that there’ll still be ongoing health care expenses. Medicare only covers some services for free. Unless you qualify for Medicaid, you’ll need to budget for costs like premiums, copays, and deductibles. You’ll also need a Medicare supplement plan, which can be affordable but is not free. Note that Medicare only provides some coverage for long-term care. Consider buying long-term care insurance to help pay for additional services.

I’ll just need 70-80% of my pre-retirement income. You may discover that you want to spend money on travel, dining, or a new hobby. Because people are healthier and more active today than in past generations, they actually require more money to go out and do what they’d like in their retirement.

Taxes are nothing in retirement. Since you’re no longer bringing home a paycheck from working each month, you may assume that your taxes will decrease in retirement. Maybe, but you’ll likely need to plan on paying taxes each year.

Downsizing means more savings. A common retirement transition plan includes moving out of the family home and into a smaller place. You might think this means fewer home-related costs, but that’s not always true.

$1 million is all I need for a comfortable retirement. For years, building a $1 million nest egg was thought of as a goal for retirement. However, that figure may no longer be accurate, due to longer life expectancies, increasing costs, and active lifestyles. There’s no specific one-size-fits-all amount to save for retirement.

I can withdraw 4% each year from my portfolio. This rule refers to the concept of withdrawing 4% from a retirement account each year. The idea is that you’ll be able to maintain a steady stream of income, while keeping the funds sustainable for many years. But again, with increased life expectancy and recent challenges, many retirees are severely underfunded for retirement. Consider withdrawing a lower percentage, such as 3% each year.

We’ll both be able to age in place. No one expects to have to move their loved one, or to be moved, to a nursing home or an assisted living facility. However, it happens to most seniors at some point during their later years. Even if you are among the lucky who can stay home, home care for an extended period is expensive too. Factor in the cost of long-term care insurance, if you are able to purchase a policy. Speak with an elder law attorney to have a plan in place, before an emergency situation occurs, so that you can protect your assets and make sure that you or a loved one gets the care needed.

07/03/2018

Some of these are pretty obvious and some are somewhat arcane, but all of the mistakes detailed in Kiplinger’s “10 Surprisingly Common Estate Planning Mistakes” are avoidable, if estate planning is done properly. Watch out for these common pitfalls.

Beneficiary boo-boos. Failing to name a contingent beneficiary on retirement accounts and insurance policies or not reviewing named beneficiaries regularly is a big mistake. The default if no contingent is named, is likely your estate, which may be subject to probate, creditors, and delays.

“Selling” property for a buck. This was popular years ago in areas that saw very rapid land appreciation. Years ago, the thought was that you could sell property for a very low price and not have to pay taxes on the gain and remove it from your estate. Of course, you can sell property for whatever you want, but the IRS will deem it a gift, if it’s less than market value. As a result, your heirs will lose the “step up” in value.

Detailing specific investments in your will. Specific bequests are handled first, and the person who died, might not even own that investment anymore. His estate might have to buy it at a much higher price, which could hurt all of the other beneficiaries.

Not thoroughly considering a well-intended gift. Placing a well-intentioned but unrealistic restriction on the sale of a home, may mean that heirs might have to go through a lengthy court process to be granted permission to sell a home. During the process, the home’s value could decline dramatically, and there could be legal fees.

Leaving assets directly to a minor, without addressing guardianship. Who takes care of the money for a kid?

Ignoring the death of a beneficiary. If one of two beneficiaries dies, where does the money go? Does it go to the surviving beneficiary or to the family of the one who died? Ask your estate planning attorney about whether your state is per capita (Latin for “by heads,” meaning per person) or per stirpes (Latin for “by branch,” meaning that each branch of the family receives a share). That will make a difference in your planning.

Errors and imbalances of ownership. If too many of the assets are in one spouse’s name, it could bring about some taxes. If you shift the house or investment accounts to the other spouse, the estate becomes more equalized, and it reduces the possibility of owing taxes after the first death.

No residuary clause. This clause addresses everything you didn’t specifically name or forgot to put in your will (or things you don’t yet own but will before your death). It also includes things you might not know you own—which happens more often than you’d think!

Failing to plan for the unexpected. There are many things that you’ve probably never even considered. You can address this by placing assets in a trust where you can control how, to whom and when money gets distributed, unlike an outright inheritance from a will.

Thinking you’ll live forever. You’re going to die someday, regardless of whether you want to face that reality. Don’t leave your family in ruin because you don’t want to deal with an uncomfortable thought.

Yes, there are many things that can go wrong after you die, but that is why your best bet is to meet with an experienced estate planning attorney who will be able to help you and your family avoid the more common mistakes.

08/14/2015

Law students at The University of Nebraska's College of Law are helping military veterans with estate planning in a special clinic that gives the veterans help with wills and other documents while giving law students practical experience. More than fourteen veterans have received free counseling, and it is hoped that the Veterans Advanced Directive Clinic will grow.

Ryan Sullivan, a professor at the University of Nebraska’s College of Law who is involved with its clinics, was quoted in a Lincoln Journal Star article about a heart-warming legal clinic at the law school. In “University of Nebraska law students help veterans with estate planning, wills and more,” he describes the Advanced Directive Clinic, where law students help veterans with estate planning and end of life documents. Students are eager to put their skills to work, and veterans appreciate having these necessary documents properly prepared.

These newly-created documents are immediately scanned into the Veterans Affairs' database, so that they can be accessed by doctors across the United States.

Sullivan remarked that the vets have done so much for the country through their service. He thought this was a good way to teach law students about the sacrifices the veterans have made and to give them help that they need.

One of the law students in the Advanced Directive Clinic said that the veterans who were helped expressed relief to have this settled. They don’t have to worry about what might happen in the future if they didn't have a will or other necessary documents.

The College of Law's professor of clinical practice Kevin Ruser said the success of the first law clinic for veterans could mean more clinics in partnership with the VA. With ten veterans on a waiting list, the initial group of three students who worked at the clinic this summer could easily grow to five students later this year. Each law student would handle three clients.

These law students have been a great help to these veterans with the basics, but more complex issues need the expertise of practicing attorneys who specialize in estate planning. Contact an estate planning attorney to discuss your circumstances.